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Life Insurance Error Gives Investors Bernie Madoff Style Returns
Sometimes those perks for wealthy clients can be the downfall of your entire institution.
In 1987, Aviva France started offering The Fixed Price Arbitrage Life Insurance Contract for wealthy clients. The Financial Times called it "the worst contract in the world". It allows the contract holder to invest with hindsight. Did you see a stock go up this week? Now you can buy it at last week's price. Did your stock plummet? Sell it at last week's price. It is the ultimate form of insider trading: time travel.
Is it legal? Yes, according to French courts, Aviva France is bound by its contract.
In 1987, market information was not as instantaneous as it is today. Trade processing times were slower, and fund values were not published frequently like they are now. Giving clients last week's prices was just a way to speed things up. Now, the contracts are still speeding things up - except this time, it's the speed of money being drained away from Aviva France.
At age 7, Max-Herve George received this contract as a gift from his father. An expert at Paris District Court confirmed that the contract allowed him to achieve annual gains of 68% per year. In 2007, the family's investments were worth 10 million euros. Numbers after 2007 are not available, but it is impossible to lose because you can discard all losing investments at last week's prices.
Once the insurance company realized their grievous error, they offered to replace the policies for 10 pounds. Thousands of idiot investors, oblivious to the benefits of hindsight investing, signed away their golden tickets. George refused.
Who were the geniuses who came up with this idea?
The major problem with this contract is that it's still a life insurance contract. Max-Herve George is only 25 years old.
So in another decade, this contract could cost Aviva France billions.
I hate to think this way, but if I were George, I would have a serious security detail. Aviva France would probably not grieve too much if George were to suffer a terrible accident.
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If you can't hold it in your hands, you don't own it.
at 10 mil in 2007, and 68% gains for another 8 years since??? I'd agree to break the contract, in return for having whatever ammount of money that is, handed over to me, now. And then I would disappear. Better quit while youre ahead than wind up having an unfortunate tall building or nailgun related incident happen to you later
This is still sold today in the form of an Equity Index Annuity.
Equity annuity index?
You mean the ones that don't allow back dated trades, the ones that limit cap gains but not losses, and the ones that charge very high internal fees?
i am not sure who is dumber...the annuity agent who believes in their products or the sheep who buy them without undrstanding them.
Good. Life insurance companies are pretty damned scummy. Nice to see them take it in the shorts every now and then.
@SlightlySeptical.
No - simply because you are not aware of something, doesnt mean it does not exist!
You got one of your 4 points right:
1. upside caps, yes but also
2. down side annual risk of a zero % return, (no negative returns)
3. and the ability, with hind sight to choose past winners.
4. fees are relative.
"Fixed price arbitrage" Now that is brilliant and here I thought insurance companies knew better, but then again it's France we're talking about here.....
The trading desks of TBTF "Banks," such as JP Morgan, Goldman Sachs, BofMerrill, MS, etc., already HAVE THIS AND HAVE HAD IT FOR A WHILE...
...BUT IT'S BACKED BY U.S. TAXPAYERS THANKS TO THE FEDERAL RESERVE & TREASURY DEPARTMENT (THANKS BERNANKE, PAULSON, YELLEN, GEITHNER, SUMMERS, ET AL.)
no doubt the genius who invented this got a huge bonus
Then blew it all topticking bitcoin...
Poor bastard only started with $10million.
back of the enveloppe (on paper) computation makes it 200k€ when he started in 1997. 10 years at +68% makes it 10 millions€. Since then it must be around 170,000,000€...
Death by a thousand nail guns will be their MO
no doubt this comapany will come up with a contingency plan. they will threaten to gut the comapany and go bankrupt, and negotiate a much smaller deal with georgie. atleast that is what i would do
that was my thought - don't know how it works in France but fixing this in US is pretty simple - just transfer the assets to a new company & bankrupt the remaining one w/the liability. if you have to spend a few $m to grease politicians to retroactively legalize any ambiguity it's just a cost of business...
genius |?j?ny?s|
noun (pl. geniuses)
1 exceptional intellectual or creative power or other natural ability: she was a teacher of genius | Gardner had a real genius for tapping wealth.
REVISED
1a. exceptional intellectual or DESTRUCTIVE power or other ENTITLED ability.
I note the cute "club" pose - what a fuckin' loser
Except, alas, that 'fuckin loser' has got a LOT more money than you will probably ever have...
Only in France. Why not just declare the company bankrupt, and give him control? The courts need to impose a fair settlement. Give him, say 10 times the face value of the policy and call it a day. Otherwise declare the company bankrupt and hand the equity over to the holders of these policies. It'll be faster and cleaner.
Perhaps wording a similar contract and selling it to a few select insiders could be a way to raid a corporation of its wealth.
Bingo....we have a winner
10 million is no problem when you can buy a judge for less.
All was well until this guy suddenly disappeared.
The good thing for the insurance company is that by the the time WWIII gets into high gear there wont be any beneficiaries to collect. The bad thing is that we won't be here either.
Only read the title....This article is about high frequency trading, right?
Only 68%? Dude really needs to quit his day job and work on this gig full time. He could make way more than that.
Sell it to a viatical trust.
No problem.
https://en.wikipedia.org/wiki/Viatical_settlement
For the cognitive impaired (which is pretty much everyone who participates in the system).
A viatical settlement (from the Latin "Viaticum")[1] is the sale of a policy owner's existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit.[2] Such a sale provides the policy owner with a lump sum.[3] The third party becomes the new owner of the policy, pays the monthly premiums, and receives the full benefit of the policy when the insured dies.[3]
"Viatical settlement" typically is the term used for a settlement involving an insured who is terminally or chronically ill. [3] A person generally is chronically ill if the person (1) is unable to perform at least two activities of daily living, such as eating, using the toilet, bathing oneself, or dressing oneself; (2) requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment; or (3) has a level of disability similar to that described in (1) as determined by the U.S. Secretary of Health and Human Services.[1] A person generally is terminally ill if the person has an illness or sickness that can reasonably be expected to result in death within two years.
As medical advancements improved the lives of those persons living with terminal or chronic illnesses, the life settlement industry emerged.[3]
From the perspective of the investor, purchasing a viatical is similar to buying a zero coupon bond with an uncertain maturity date[however an annual maintenance fee is payable i.e. the policy premium]. The return depends on the seller's life expectancy and when he or she dies.
...
Sound like the logical underpinning of the whole global control scheme if you ask me. It all starts with the force feed propaganda that induces cognitive impairment regardless of what linguists and other neurological charlatans will say.
If Aviva has 2 brain cells to rub together over there they better find a way to get it tried in NY courts........I hear you can buy decisions for big business these days.
The thing that amazes me most about those on the inside isn’t that they have managed to become billionaires. What amazes me is that they aren’t already trillionaires.
I guess once you realize you have several billion more than you can ever possibly spend in your life, your priorities just naturally shift to hookers and blow.
now age 25? got at age 7? 18 years ago?
so, in 1997 the dopes STILL offering the deal?
Well they are French, and they aren't quite as sophisticated as uns Merikuns.
Sort of reminds me of When the Sleeper Wakes, by H.G. Wells...
Guy falls into a coma for 203 years, wakes up to find through the miracle of compound interest set up in a trust, he now owns half the world.
Therein lies the answer. Bet you never heard of this guy.
http://en.wikipedia.org/wiki/Herbert_Stein
Stein was the formulator of "Herbert Stein's Law," which he expressed as "If something cannot go on forever, it will stop."
A wolf in sheep's clothing. Proof that Nixon was a puppet installed in the wake of the JFK killing.
In Stein's reading, The Wealth of Nations could justify theFood and Drug Administration, the Consumer Product Safety Commission, mandatory employer health benefits, environmentalism and "discriminatory taxation to deter improper or luxurious behavior."
Looks like Kissinger.
http://www.nndb.com/people/410/000117059/herbert-stein-1-sized.jpg
Hi Aviva France,
I, how do you say, make problems go away.
Regards,
thehonch@hebegone.com
(I should have gotten the Nathan Jr. contract)
Someone is going to get Corzined.......
NEVER make yourself worth more Dead than Alive.
That, or never let your death cost less than you're worth dead.
Polonium vinaigrette for your salad, sir?
Anyone have the 411 on 700 Accounts Insurance, Life insurance, regulated under IRS Code 700 series.
Maybe advertised as a 770 Account as a substitute for Annuity. After an initial period of time or Vesting you can take a monthly tax free withdrawal if you are up near the maximum for your State. Tax free since it is a life insurance instrument. And you can make maybe 6% or more in Interest each year depending on the set up.
There maybe different names for this Instrument and the spin is just to call it a secret of the Wealthy.
I don't know insurance, but think these would be Life insurance set up for 20 year periods. So could be invested in assets that you chose in order to match the high interest rate expected. There may be a guaranteed minimum rate or zero is the lowest so you don't lose money in any one year.
Advertised as a secret. You can withdraw money as you earn interest as long as Vested and your beneficiary is not you.